The Globe and Mail attempts to identify cheap stocks that billionaire investor Warren Buffett would like in its Friday, June 7, edition. The Globe's Ian McGugan writes in the Number Cruncher column that the Oracle of Omaha is known for preferring companies with high returns on equity (ROE). A strong ROE is a sign that companies are able to convert the money contributed by equity investors into profit -- and that is a fundamentally attractive characteristic for any business. Mr. Buffett is also renowned for buying things on the cheap. One sign of a bargain stock is a low price-to-earnings (P/E) ratio. Mr. McGugan looked for stocks on the Toronto exchange with ROEs above 20 per cent along with a single-digit P/E. These stocks, according to Mr. McGugan, have a demonstrated ability to produce profits while also being considerably cheaper than the market norm. To avoid microcap stocks that might involve too much risk for most investors, Mr. McGugan only considered stocks with at least $200-million in market capitalization. Stocks with Buffett appeal are Morguard North American Residential Real Estate Investment Trust, Chorus Aviation, Mandalay Resources, Rio Alto Mining and Calloway REIT.